Posted: Monday 23 July 2012
By Chris Ness
I read with fascination in today’s Herald the article about high earning executives not claiming tax relief that they are entitled to for their pension contributions.
I am encouraged that in general so many people are actually contributing to pensions. However – why on earth would anyone want to ignore an extra £1k plus contribution to their pension? Lack of awareness can surely be the only explanation.
A lot of people will be in schemes where their full tax relief will be given at source through PAYE. However, for the higher rate or additional rate tax payers where this is not the case the onus is on the individual to reclaim the additional 20% or 30% via their tax return or directly from HMRC.
This can be quite large amounts and it is a relatively simple process. The income tax relief is arguably the main benefit of saving in a pension, and not to use this fully is a missed opportunity in my opinion. This is something I review regularly with my clients not only to make sure full relief is claimed, but also to make the best use of it.
In some cases HMRC amend individual tax codes to reflect regular ongoing pension savings, but in others they simply send a cheque to the client. This can then be invested into a pension to make the make the most of the income tax relief. In an environment where investment returns are limited, making the most of these benefits is simply prudent planning.
If in doubt get it checked out – isn’t it worth it for a grand a year’s additional investment?